CenturyLink and Frontier, two service providers that have sizeable rural market segments, are advancing their rural broadband expansion efforts via the second phase of the FCC’s Connect America Fund (CAF-II) program.

After accepting $500 million in CAF-II funding, which it will complement with its own capital, CenturyLink set a goal to deliver broadband services to about 1.2 million rural households and businesses in 33 states over the next six years.

CenturyLink has inched closer to meeting its FCC CAF-II program commitments, reaching over 600,000 rural homes and businesses with 10/1 Mbps broadband over the past two years.

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Interestingly, CenturyLink revealed that about 70% of the homes in the target areas have speeds of 20 Mbps or higher. The service provider is on track to have enabled 60% of its CAF commitments by the end of 2018.

The FCC’s program rules associated with the CAF program require companies that accepted the funds to roll out broadband to 40% of the eligible locations by the end of 2017.

Fellow telco Frontier is moving forward with its CAF-II commitments, providing broadband to over 331,000 and small businesses in its CAF-eligible areas, and the company has improved speeds to nearly 875,000 additional homes and businesses. The deployments reflect a combination of Frontier capital investment and resources that the FCC has made available through the CAF program.

In 2015, Frontier accepted $283 million in annual CAF-II support from the FCC that it says will enable it to build out broadband service to over 650,000 rural locations that it could not economically reach before.

The service provider is also making progress ion extending services to rural customers California, Florida and Texas, three states it expanded into via its acquisition of Verizon’s wireline assets the service provider will leverage its eligible funding from the CAF-II to bring broadband services to underserved areas of California and Texas.

In California, the service provider is using $32 million in CAF-II funding annually over the next six years for broadband deployment in Verizon high-cost service areas. During this six-year period, Frontier forecasts that CAF-II funding could enable it to bring 10/1 Mbps broadband service to nearly 77,000 rural locations within this territory.

Frontier brought broadband service to over 275,000 households across California, using a mix of its own capital and the FCC's CAF-II program funding. The service provider can now offer broadband service in 200 neighborhoods in about 100 cities and communities in 15 California counties.

FCC’s new auction hope

Since some areas did not make sense for telcos to accept CAF-II funding, the FCC will hold a $2 billion Phase II auction this July.

During its monthly meeting in January, the FCC said interested service provider participants have until March 30 to file an application to participate in the auction, which is set to begin on July 24.

Under the new program, service providers like CenturyLink, Frontier or Windstream can compete for support of up to $2 billion over the next decade to offer voice and broadband service in unserved areas where without government subsidies there is no business case to either expand or provide service.

Besides creating incentive for large price cap carriers, the FCC worked to incorporate ways to make it easier for smaller independent telcos and wireless ISPs to participate.

FCC Commissioner Mignon Clyburn said in a statement that she was “pleased that we eased some of the burdens small providers face, including challenging financial qualifications and the use of consultants.”

However, she added that concerns remained about the methodology and the lack of focus on expanding Tribal land broadband services.

Ultimately, the outcome of this process will take time to understand as the large and small carriers are in the process of crafting their bids and choosing what areas they would allocate the additional funding.

Wireless could close gaps

While providing wireline-based broadband is clearly the focus for providers that accepted CAF-II funding, the realities of building out fiber in hard to reach rural areas remains a struggle for all service providers.

To address the construction cost issue, CAF-II recipients CenturyLink, Consolidated, Frontier, and Windstream are in the process of either rolling out or trialing broadband wireless technology in their rural markets.

CenturyLink, for one, asked the FCC for permission last fall to test 3.4 GHz wireless spectrum in some of its rural markets to complement its rural wireline expansion efforts.

In an FCC filing, CenturyLink said it would conduct the testing to “understand the viability of new technologies in this band that may be useful in providing fixed broadband services.”

Frontier revealed during an investor conference last September that it was testing broadband wireless. At that time, the service provider said that if it works the way it expects it could deploy it in various markets in 2018.

Consolidated and Windstream have also cited interest in using broadband wireless for rural expansion. The two telcos in a joint FCC filing (PDF) with Frontier related to a request to create flexible use of spectrum bands between 3.7 and 24 GHz for rural fixed point-to-multipoint deployments, such as through the rules proposed by the Broadband Access Coalition.